Heâ€™s Getting Back Into Hay

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For any number of reasons, 2013 is looking like a good year to get back into alfalfa hay production after a long hiatus, says Tim Goodenough.

Since 1999, Goodenough has planted only corn and soybeans on his 1,000-acre crop farm near Mindoro, WI. This spring he intends to seed about 350 acres of his ground to alfalfa.

Rising input costs are playing a role in Goodenough’s decision. “We’re looking for ways to get our organic matter built back up again without spending a fortune on fertilizer,” he says.

Marketing opportunities were also a consideration. Several dairies within a 10-mile radius of Goodenough’s farm have been expanding in recent years, and it looks like they’ll continue to do so. “If we can raise good-quality alfalfa, there should be pretty good demand for it locally,” he says.

The grower also believes alfalfa prices will be more than competitive with corn and other grain prices this year. “It looks like there’s going to be an awful lot of corn planted nationally. If we have good weather and a halfway decent crop, corn prices are going to drop. Being in alfalfa will give us a good way to diversify.”

Many farmers surveyed by USDA in its spring Prospective Plantings report apparently aren’t thinking along similar lines. That comes as a surprise to market observers such as Matt Diersen, ag economist at South Dakota State University.

According to the report, released in March, U.S. farmers intend to harvest hay on 56.4 million acres this year. That’s up just marginally from the 56.3 million acres they harvested in 2012. “Given the record or near-record prices for hay we’ve been seeing, it’s surprising we didn’t have an increase in acres,” says Diersen. “You would think the economics would favor bringing at least some acres back into production.”

But the numbers in the report represent producer intentions; a lot might change between early April, when Diersen was interviewed for this article, and the start of the new-crop harvest in most of the country, he reminds.

“When the report came out, growers in places like the western Dakotas and Colorado that were hit hard by drought may have been looking back at last year and thinking it just wouldn’t be worth it to harvest some of their (hay) fields this year. If they get good rain this spring, they could still decide to harvest those fields. So we could be in for another surprise in June. But that’s only if they get the moisture.”

Even then, an acreage bump in a few regions isn’t likely to lead to much of a boost in the national hay supply. “We’re still talking around 56 million acres nationwide, not 60 million acres,” says Diersen. “Take that low acreage, figure a trendline yield of 2.4 tons/acre nationally, and it’s a pretty low production number to work with for the year.”

Coupled with what likely will be tight May 1 hay stocks, especially in the Western U.S., the expected low production will probably keep some upward pressure on hay prices at least through the first three quarters of 2013, he adds. That pressure could ease in the fourth quarter with sizeable corn and soybean harvests. “As substitutes for hay (in rations) become more affordable, demand will start dropping off. That will put downward pressure on hay prices.”

As a result, shaping a marketing strategy is likely to be “tricky” for many commercial growers in 2013, Diersen says. In the southern regions of the country, growers might want to think about marketing earlier than they normally would in order to capitalize while prices remain high.

A late-arriving spring in many parts of the northern U.S. could keep growers there from employing a similar strategy. “If you’re in that part of the country, it might be a good idea to dump any old stocks as soon as you can in order to take advantage of high prices.”

With anything resembling “reasonable ending stocks” in May, Diersen points out, look for hay prices to drop off by 10% or so during the 2013-14 marketing year. “They’ll be lower than they were during the current marketing year, but still much higher than they’ve been for most of the last decade.”